NCLAT Delhi Terminates Insolvency Proceedings Against Asian Hotels (West) Ltd., Accepts Settlement Proposal By Promoters
Pallavi Mishra
24 Jan 2024 5:30 AM GMT
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has terminated Corporate Insolvency Resolution Process (“CIRP”) of Asian Hotels (West) Ltd., which was initiated by NCLT in September 2022. The Bench has accepted the Settlement Proposal submitted by Promoters...
The National Company Law Appellate Tribunal (“NCLAT”), New Delhi Bench, comprising of Justice Ashok Bhushan (Chairperson) and Shri Barun Mitra (Technical Member), has terminated Corporate Insolvency Resolution Process (“CIRP”) of Asian Hotels (West) Ltd., which was initiated by NCLT in September 2022. The Bench has accepted the Settlement Proposal submitted by Promoters and Suspended Directors of Asian Hotels (West), wherein 100% dues of Financial Creditors along with interest and 100% dues of the Operational Creditor, Government dues and dues of employees with entire CIRP cost has been proposed to be paid.
The Asian Hotels (West) Ltd. owns the five-star hotels namely Hotel Hyatt Regency Mumbai and JW Marriott, New Delhi Aerocity (through its subsidiary).
Background Facts
In 2010, the renowned Asian Hotels group had demerged to form Asian Hotels (North), Asian Hotels (East) and Asian Hotels (West) Limited (“Corporate Debtor”). The Corporate Debtor is engaged in hospitality sector and owns Hotel Hyatt Regency in Mumbai and JW Marriott in New Delhi Aerocity (through its subsidiary).
Yes Bank Ltd. had sanctioned credit facilities to the Corporate Debtor and the account of latter was declared Non-Performing Asset on 27.07.2021. The Bank issued loan recall cum Bank Guarantee invocation notice to the Corporate Debtor, however, the payments were not received. Therefore, Yes Bank Ltd. filed a petition under Section 7 of the Insolvency and Bankruptcy Act, 2016 (“IBC”), seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor over a default of Rs. 264,07,35,129/-.
Subsequently, Yes Bank Limited assigned the Corporate Debtor's debt to JM Financial Asset Reconstruction Co. Ltd (“Financial Creditor”) on 21.06.2022. The Financial Creditor replaced Yes Bank as Petitioner in the proceedings before NCLT. On 16.09.2022, the NCLT admitted the petition and initiated CIRP against the Corporate Debtor.
The Suspended Director of Corporate Debtor filed an appeal before NCLAT against order dated 16.09.2022.
On 11.08.2023, the Promoters, Suspended Directors and Shareholders (having 88% shareholding in the Corporate Debtor) submitted a settlement proposal under Section 12A of IBC to the Committee of Creditors (CoC), along a Bank Guarantee of Rs. 40 Crore. The Suspended Director of the Corporate Debtor filed an interim application before the NCLAT, seeking direction to CoC to accept the settlement proposal.
The Settlement Proposal proposed payment of 100% dues along with interest of Financial Creditors and 100% dues of the Operational Creditor, Government dues and dues of employees with entire CIRP cost.
The CoC comprised of two Financial Creditors (i) UV Asset Reconstruction Co. Ltd. (UVARCL) (Voting Share 98.84%), and (ii) PTC India Financial Services Ltd. (PTC) (Voting Share 1.16%).
The Settlement Proposal was revised on 04.10.2023 with the offer to deposit the entire admitted outstanding dues, without any haircut within six weeks from approval of Revised 12A Proposal by CoC.
On 13.10.2023, the CoC dissented the revised proposal. The Appellant contended that the Settlement Proposal has been arbitrarily rejected by CoC.
NCLAT Verdict
The Bench opined that CoC had arbitrarily disapproved the Settlement Proposal under Section 12A of IBC when the entire debt of Creditors was proposed to be paid.
“We having noticed the relevant facts and sequence of events and minutes of 13th to 16th CoC meetings as well as Proposal submitted by the Appellant dated 11.08.2023 and Revised Proposal dated 04.10.2023, we are satisfied that the decision of the CoC is arbitrary in not approving 12A Proposal which Proposal offered to pay entire debt of Financial Creditors as well as all other creditors.”
It was observed that the rejection of proposal was made by CoC member UVARCL upon mala fide.
“When in pursuance of order dated 17.10.2023, the entire amount has been deposited, the UVARCL refused to accept the amount which shows its mala fide intent. Thus, the facts and circumstances and sequence of events clearly proves that decision of the CoC not accepting the proposal for payment of 100% dues is arbitrary and unsustainable. We, thus, hold the Proposal submitted by the Appellant on 11.08.2023 as revised on 04.10.2023 acceptable to liquidate the debt of the Corporate Debtor and close CIRP and to make payment of debts of all Creditors.”
While allowing the appeal, the NCLAT closed the CIRP and accepted the Settlement Proposal.
“The Proposal under 12A submitted by the Appellant dated 11.08.2023 as revised on 04.10.2023 is accepted. The CIRP is closed. The order dated 16.09.2022 admitting Section 7 application is set aside.”
Case Title: Sandeep Gupta v JM Financial Asset Reconstruction Company Ltd. & Anr.
Case No.: Company Appeal (AT) (Ins.) No. 1192 & 1193 of 2022
Counsel for Appellant: Mr. Arun Kathpalia, Sr. Advocate, Mr. Abhijeet Sinha, Mr. Vikas Goel, Mr. Ritesh Sharma, Mr. Sidharth Aggarwal, Mr. Vivek Gupta, Ms. Anisha Dahiya, Advocates.
Counsel for Respondent: Ms. Pooja Mahajan, Mr. Savar Mahajan, Ms. Shreya Mahalwar, Advocates for RP. Mr. Maninder Singh and Mr. Navin Pahwa, Sr. Advocates with Mr. Siddharth Garg and Mr. Nikhil Khare, Advocates for UV ARCL. Mr. Brijesh Kumar Tamber, Mr. Vinay Singh Bisht, Mr. Prateek Kushwaha, Mr. Sahas Bhasin and Mr. Yashu Rustagi, Advocates for Intervenor (EPFO). Mr. Gopal Jain, Sr. Advocate, Ms. Bhavya Shukla, Advocates for Intervenor Mr. Sumesh Dhawan, Mr. Wattan Sharma and Mr. Shaurya Shyam, Advocates for Applicant in I.A. No. 6049 of 2023.
